In their weekly report, analysts at Citibank point out their medium to long term bias in the US Dollar Index (DXY) remains bearish. The see the Index at 97.26 over 0-3 months and at 93.92 in a 6-12 month forecast.
“In short term, trade war risk has raised its ugly head again, generating risk aversion and some $ support, probably correctly given the greater downside risk to China, EM and the EA from trade wars relative to the US.”
“However, our bias remains that the medium to long term trend is for a $ bear market. This is in line with the historical pattern where $ depreciation (vs. G10) tends to be the long term norm, occurring in bursts of around ten years, interrupted by bouts of $ strength for five or six years at a time.”
“Overall, our forecasts suggest around 4% $ downside over 6-12m vs G10. Over the long run, this $ downside likely extends to 13%.”